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Will Tech Help Family Offices Thrive In Spite of Market Headwinds?

Growth of ultra-high-net-worth individuals (UHNWs) and family offices has been strong. And for family offices with the financial technology to handle greater portfolio complexity, the future is bright. But the news isn’t as encouraging for those lacking the capabilities to effectively preserve family wealth amidst today’s market volatility. Mired in manual processes that slow services, they’ll be kept from more strategic work and miss opportunities.


This risk is exacerbated when underlying investments aren’t aligned with long term goals, which is particularly unfortunate when technology now exists to easily overcome such hurdles.


Able to grow

It’s no secret that family offices are often strapped for resources, and the current talent and skills shortage adds to the problem. After all, processing data is time-consuming, as is assembling vital, timely reporting. When wealth preservation goals are best served with more complex investments, the need to do more with less becomes an ever greater priority. 


This requires investing in new technology that can ease the burden of portfolio complexity. Yet, many family offices are trepidatious when it comes to amalgamated portfolios. The quality and timeliness of investment data streams vary and managing data across different views is difficult, making reporting challenging at best.


Consider the uptick in direct private investments. Valuations are difficult to obtain, and when provided, amount to little more than a guess. Hedge funds and private equity estimates arrive after the end of a month or quarter, and all the while, they accumulate revisions that further muddy the data waters.


That said, it’s easy to understand why family offices typically don’t have a single system. Instead, they often have separate accounting and investment books of record (ABOR and IBOR). This usually requires interim reporting, and as family office staff knows all too well, additional time and effort to reconcile the differing formats.


To take advantage of the current market dynamics, family offices must be able to cull data for insights that will support timelier, more powerful decision making, while enabling staff to accomplish more with less.


Working it

An emerging class of purpose-built technology is now allowing family offices to do such things by working the intrinsic characteristics of investment data. In doing so, the solutions can weigh, calculate and identify reliable data points to eliminate further research, while driving greater staff efficiency and reducing overhead. 


Take investment types. You can trust the end-of-day share price of a stock like IBM to be solid. A valuation of a direct investment, though, is entirely different. New valuations must be factored in, as well as the age of the information whereas older data delivers less value. But, by assigning each characteristic a weight and combining them, valuable new data points can rise to the top.


Some of these solutions are incorporating machine learning, too. When accompanied by advanced algorithms, better quality data is surfaced, which can then be assigned a level of confidence. When presented in a heatmap, family office staff and investors no longer need to spend time questioning data. This, in turn, supports task automation that delivers savings, empowers staff to do more with less, while delivering performance-enhancing data. 


Start your engines

A new generation of data engines are endowing family offices with newfound capabilities. These can record details once, then automatically send data along to the correct system. This makes it easier to handle general ledger, modeling, investment monitoring, analytics and performance. And, with some solutions providing data confidence levels and visual displays of family members, staff can gauge at-a-glance what needs their attention most of all.


A particularly interesting development has been technology that combines ABOR and IBOR. This helps simplify workflows and provide more timely, better quality data to portfolio managers. Other capabilities family offices can leverage include advanced modeling for private investments, hedge funds and stocks. Pacing modelers can also enable flexible capital call/distribution scheduling and simulation, along with enhanced forecasting. And, many solutions offer extensive libraries for everything from knowledge date to audit control reporting.


There’s a lot developing in the family office space. Long standing data challenges are being overcome at a critical point in the market’s development. Technology investments can help them easily manage portfolio complexity, navigate family structure and overcome fears of amalgamated portfolios.


With the right technology foundation, savvy family offices can successfully serve families better and preserve wealth, while cementing their own future viability.



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Christopher McCoy

Christopher McCoy


Ledgex Systems LLC

Member since

17 Oct 2022



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